Web Wine: The Grape Debate

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Web Wine: The Grape Debate

E-commerce is turning the complicated details of liquor distribution into the whine industry.

Arcane direct shipping laws are creating havoc among wineries that conduct business online, their customers, plus state and federal governments.

"I have had to tell customers in other states that [our wine] is not available for them and they are flabbergasted," said Deborah Cahn, co-owner of Navarro Vineyards in Anderson Valley, California.

Most, but not all, state and federal laws prohibit interstate shipment of alcohol, which only adds to the confusion.

At one end are frustrated groups of consumers and wine-makers trying to streamline laws for easier access to their favorite wines.

"We would like to see interstate direct shipping laws allowed in all 50 states," said Seana Wagner of Free the Grapes.

At the other end are wholesalers trying to protect their turf who have persuaded lawmakers to enact tougher restrictions against interstate alcohol retailers.

Never mind that direct shipments – which eliminate the middleman in the traditional three-tier model of liquor distribution – account for a small percentage of overall wine sales.

Wholesalers supported federal legislation, introduced last spring by Representative Joe Scarborough (R-Florida), that sought to toughen already-strict federal shipping laws and to make it possible for prosecutors in 20 states to seek injunctions against companies that violate state alcohol laws.

"We have a problem with ... wholesalers lobbying to pass felony laws and [using] other scare tactics," said Lesley Berglund, CEO of Ambrosia. "That's ridiculous."

It's already a felony in seven states to ship wine to consumers in another state. Only 17 states currently allow direct shipments.

"It's very frustrating. I feel like I need a law degree," Navarro's Cahn said. "It's required an enormous amount of bookkeeping on the part of small wineries to be in compliance."

An amendment added to the Scarborough bill in the Senate, after it was passed by the House, was intended to make life easier for online wineries."My amendment ... won't permit that kind of discrimination against interstate commerce," said Representative Christopher Cox (R-California).

Cox's amendment would force litigious states to first prove they are not suing wineries simply to protect their local industries. It is based on the commerce clause of the Constitution, which prohibits states from favoring local sales over interstate sales.

After processing an order, Wineshopper.com works through wholesalers to deliver the wine to the customer, either by direct shipment or by guiding the customer to a local retailer where they can pick up their order. It all depends on the state where the order is sent.

EVineyard, an online wine retailer, also tries to work with wholesalers. CEO Larry Gerhard, a grape farmer himself, rents warehouses in different states, hires employees in those states, and works with state wholesalers who distribute the wine ordered on his site, all of which ensures he's in compliance with many state laws.

"That was costly and that took time," he said. But "taking a shortcut and challenging the law because it makes business easier isn't practical."

But Ambrosia favors another approach currently being circulated among several states. This legislation – model-direct shipping – has three components: It limits the number of cases of wine that a household can purchase in a year, sets up a tax collection process for vineyards that direct-ship, and mandates responsible shipping, which includes requiring an adult signature upon delivery and other measures.

Ambrosia's Berglund said that four states have passed this legislation and 13 others are considering it.

"That is the solution that will work for everybody," Berglund said.

But a WSWA spokesman was skeptical that everyone would comply with a law like that.

"If you open up the state law to allow direct shipping, the state gives up its ability to control those shipments," said a WSWA vice president, David Dickerson. "It becomes a 'Trust Me' situation."

But Cox believes it's possible.

"I think that it is within reach to establish a system that protects minors, as well as adult consumers that wish to purchase wines from a vineyard. The Internet is making this even more likely," Cox said.